Being a guarantor - advice needed

[Sandsnake]

Evening all,

Long story short - my parent is in a very tight spot re housing. They are looking for private rentals and struggling to secure anything due to the hot rental market where they live. They would have a wider range of properties available if I could act as a guarantor.

I am financially in a position to do this. I also trust my parent; they would do pretty much anything to make sure that I was never called on to pay the rent. The only issue is that we’re considering potentially upsizing fairly soon. This would require a considerably larger mortgage, although I don’t envision us trying to push ourselves to the max of our borrowing potential.

I realise that being a guarantor would affect affordability calculations. However, I’m struggling to find detail of how much this is likely to be by. Parent’s rent will likely be in region of £750 - £900 pcm. Is anyone able to advise as to what extent this would affect affordability calculations? Would it be a straight case of all of his rent being considered as part of my monthly outgoings, even if I’d never had to pay anything? And would that amount of rent be deducted in full from how much the bank would think I could pay back per month in mortgage? Or would it be more nuanced than that?

I hope the above makes sense, and would hugely appreciate any insight!

>I realise that being a guarantor would affect affordability calculations.

Are you sure about this? I have never heard of this before.

Are they on the council list ( assuming they are over 55)…..not sure about your area, but relatively easy to get an over 55s property in my area ….maybe 4 month wait?

Is this something you need fo declare on a mortgage application? It wouldn't have occurred to me to do so unless there was a specific question about being a guarantor or potential liabilities.

In your place I'd contact some mortgage brokers and ask them.

I’ve never heard of it either … best to check that @Sandsnake

I would very much doubt being a guarantor would affect mortgage calculations. There are people with multiple DC at uni at any given time who they are guarantors for - they would never be able to remortgage/get a mortgage if affordability checks took being a guarantor into account. The guarantor paperwork doesn't ask if you are already a guarantor.

Exactly- I have been a guarantor for 2 children at uni and it hasn’t been an issue when getting a mortgage/remortgage.

It’s not a question asked on the forms to my recollection as being a guarantor doesn’t normally cost you anything.

OP I just applied for a mortgage with First Direct last month who are very risk adverse and I don’t recall being asked this.

I am a solicitor. The one legal thing I have shared with my children is that they should almost never act as a guarantor. Relatively early in my career I had to act for somebody when a guarantee was called up. It was catastrophic for the guarantor. It would take something very compelling to make me agree to be a guarantor. People generally want guarantees because in their opinion they are taking on a poor risk and they'd rather shift that risk to somebody else.

I have only ever acted as a guarantor once - for my brother who I trust absolutely and for an amount I could pay if I needed to.

I never had to declare it on the mortgage application at the time (about 8 years ago).

Your parents may be the best ever, but what about unforseen circumstances? If they were to lose part of their income, be it wages or some benefit?
Some incapacity that prevents the physical act of paying?
Some disaster that takes up what should be rent money?
With all the will and love in the world they cannot guarantee you, you can only guarantee them.
If you had to pay, even for a short time, how would it impact you?

Is there a mechanism whereby you, or they, could pay a lump sum at the beginning of the tenancy that covers the shortfall between affordable, and what they have to pay each month?

I'm a guarantor for my son and my credit rating has not changed

But you presumably would act as a guarantor for your children if they needed you to?

Not a Solicitor but in my line of work I have come across more than one person who has been made bankrupt through being a guarantor.

I have always told my DC the same. It would have to be exceptional circumstances for me to consider doing it. Apart from Uni accommodation where the DC can't left a place to live without guaranteeing it, I can't think of a circumstance where I'd do this.

How old is your DP? If they're over 55 are they looking at accommodation specifically for the over 55's?

Could they move to a cheaper area or live in a house share?

They may not want to do any of these but realistically it doesn't sound as though they have a lot of options.

One thing my work has taught me is that you can never take anything for granted. Something could happen the day after they move in which means that they lose their income or you lose yours. Life is never linear.

So @Sandsnake it appears from the responses that it would not affect your affordability calculations for a mortgage (though check with a broker).

It’s more a question of how much you trust your parent to be able to keep up the repayments for goodness knows how long. People have to trust their children all the time with accommodation at uni but they are normally only 1 year contracts & it’s a lot more unusual to have to trust a parent. It sounds like it would increase their options considerably, however.

Thanks all. Loads of replies and great advice - all very much appreciated. And thanks for tolerating the gender neutral ‘parent’ in an attempt to make things less identifying 😂

Oddly enough, I went on a Barclays Mortgage calculator last night and it did ask for whether I was a guarantor for a loan / mortgage/ rent when estimating affordability. I played around with it and the amount offered was reduced by approx 8% when I said I was a guarantor vs when I said I wasn’t.

As for the parent, I’ve encouraged getting on the list for HA’s and will mention the council too. It’s all very difficult as their mortgage term was up and they didn’t have sufficient equity to get a life time mortgage as they had hoped they would. Things are now at an acute stage as they’ve sold their property (which is good) but trying to get a rental in time for completion. There’s not a huge amount of time left, and it’s all pretty stressful. The fact that they’re having to leave their home of the last 25 years is quite a horrible thing to process, but I’m also aware that their are others in worse positions.

I do trust that they would do basically anything to avoid me being called on to step in and pay the rent. They are fundamentally decent and trustworthy, just not the best at decision making and planning. They have a state pension income, which they supplement with work. I’ve leaned towards only being the guarantor if it’s absolutely crucial, which they completely understand.

Again, very many thanks for the advice.

So if they have state pension, are they eligible for Pension Credit?

Do they have a SW who could help them with the move into social housing?

I think you need to phone a whole of market broker and ask them to find you a mortgage for the size of house you are looking for, with a lender who does not take rent guarantor status into account. A good broker should be aware of the lenders who do ask this. They won’t hold it against you, particularly if you tell them you are only considering it right now.

You are a good person for looking out for your parents. I am sure it will come good for all of you.